When does funding become consideration for a supply?
Charities often receive funding from local authorities and Government Departments to support their charitable activities. You will need to consider whether the funds received by the charity are an outside the scope grant or are consideration for a supply.
What if a charity has incorrectly treated funding as an outside the scope grant?
You will need to consider the correct liability of the supply being made by the charity. If the supply is taxable then it may be appropriate for you to assess the charity for the tax due on the supplies made, which the charity can in turn charge on to the funder. However, before assessing you should carefully consider all the papers available regarding the funding. The responsibility is on the charity, as the supplier, to determine the VAT liability of the supply.
Where possible we have provided additional guidance to that available in Notice 701/1 (HMRC website) Charities. In some instances additional information can be found elsewhere in departmental guidance.
|VAT Relief||Further information|
|Advertising and goods connected with collecting donations||VCHAR11000|
|Aids for the disabled||V1-07, Chapter 12 VAT reliefs for disabled people|
|Construction||Notice 708 (HMRC website)|
|Buildings and construction|
|Drugs and chemicals||VCHAR15000|
|Equipment for talking books and newspapers||VCHAR12000|
|Fuel and power||Notice 701/19 (HMRC website) Fuel and power|
|Lifeboats, slipways etc.||VCHAR13000|
|Medical and scientific equipment (“relevant goods”)||VCHAR14000|
|Rescue equipment||Notice 701/1 (HMRC website) Charities|
|Resuscitation training models||Notice 701/1 (HMRC website)Charities|